The Elliott Wave Theory is one of the most widely used tools by market analysts due to its high degree of effectiveness. From stock market to crypto, these theory allow analysts to have a understanding on how the market is moving and why it’s moving in those ways. Let’s know the man behind the market’s waves.
Ralph Nelson Elliott was an American economist born in 1871, but he spent his early years working in accounting and as an executive for several railroad companies in Central America.
Upon returning to the U.S. in 1925, Elliott began feeling ill due to a disease he had contracted in Central America, which forced him into an involuntary retirement to focus on his health.
As a result, he began analyzing price fluctuations of the Dow Jones, covering a 75-year period with annual, monthly, weekly, daily, and even 30-minute charts .
In 1934, he began summarizing his market observations, writing down the principles he applied to all degrees of wave movements.
This is known today as fractals. A fractal is a pattern that repeats itself over and over again in a continuous feedback loop ♾️
In the 1940s, he fully developed the concept that the flow of emotions and human activity follows a natural progression governed by the laws of nature.
In his wave theory, Elliott considered that the market moves in cycles and waves, and that each wave in turn contains smaller waves of the same pattern and laws (these are the fractals).
To sum up his thesis in a single sentence, Elliott proposed that there are impulsive waves (5) and corrective waves (3), and from there, subsequent waves are generated, always respecting this principle
Elliott condensed all his work into the book Nature’s Law — The Secret of the Universe at the age of 75, two years before his death. Today, most analysts use his method to analyze and/or trade, with his books being a constant reference for every market event.
And perhaps the phrase that best represents his way of thinking is this one, spoken by him:
“There is nothing more widely accepted than the existence of a universe governed by laws. Without laws, it is evident that chaos would reign, and where chaos rules, nothing else exists.”